Fiscal surplus and fiscal deficit : Excédents et déficits budgétaires : tout est calme sur le front menétaire

Decisions regarding the targeted level of government revenues and expenses – part of fiscal policy – are made by the Government of Canada with the approval of the Parliament of Canada. [...] This would mean that for days when there is a cash shortage in the account, the financial institution would borrow funds in the name of the depositor to make sure the targeted cash threshold in the account is reached. [...] If the overnight rate is trading above the target – a sign that there is not enough cash available to lend in the interbank market – the Bank will intervene by adding liquidity to the private economy through the purchase of government securities. [...] This added liquidity – in the absence of any intervention by the Bank of Canada or the Government of Canada – would create an imbalance in the form of surplus liquidity in the private economy that would drive the overnight rate lower. [...] If the government uses the increase in cash reserves to buy back government bonds from the private sector, this would neutralize its withdrawal of liquidity (the buy-back of government bonds constitutes an injection of money into the economy that offsets the withdrawal of liquidity resulting from the budget surplus).